Savings Diary: August 2017 Update – Volatile

Blimey, it’s been over two weeks since my last post.  I’ve drafted about 6 posts, finished none and posted none.  Oh well, among all that inefficiency I have carried on my weekly habit of updating a spreadsheet that tracks my spending and NetWorth.

<Repetition Alert> The most important of these goals is my savings rate. For the last couple of years I’ve been targeting 60%, and just missed out on it both years.  Hopefully 2017 will be the year.  Then, once 60% becomes normality, I’ll increase my target to 65%, then 70% and so on.  At least until my happiness plummets off the edge into the Chasm of Despair.  Then I’ve found my limit.

The second goal targets the growth of my NetWorth.  Sure, it’s a little out of my control.  I can steer it in the right direction with my savings rate, but it will also be at the whims of the market to some extent. <Repetition Alert End>

Savings Rate – 60% target

Being well and truly in the accumulation phase, my savings rate is the most important aspect of my plan to become Financially Independent.

A high savings rate will be the Nitrous Oxide in my savings journey and also the metric that is most within my control.  I just need to apply a subtle upwards pressure to my earnings and a brute downward pressure on my spending.  Result: higher saving rate and in the long run an increasing NetWorth.

My expectation is to keep my savings rate above 50%, that way I’m buying at least a month of freedom for every month that I work.  Compounding just makes it even better.  A rate of 60% is me trying to push myself, as the years to financial independence melt away as you push the savings rate north of 50%.

All things savings rate were ticking along nicely at the end of July, the Mr Z Financial-Independence-Machine had built up some steam and as a result a savings rate of 70.3% for the year to date.

Stepping up to my keyboard, I was a little nervous.  I knew that Mrs Z and I had spent a fair amount of money, mainly on a holiday in late September.  With shaking hands I began to pull the data together in Excel…

Whoa!  Not used to this…what’s that dip all about

My frivolous spending resulted in a saving rate of 25.1% for August.  The sharp dip in the graph above shows how out of character this is for 2017.  It has felt like Mrs Z and I were making it rain money in August, our senses have been honed towards a higher savings rate and spending as much as we did felt unnatural.

The reason for the inflated expenses is that we paid for most of our holiday in September, flights and accommodation.  It’s a matter of timing of cashflows.  I have a savings account, that I put a small amount into each month.  It earns a pathetic amount of interest.  If it were there to purely generate return, it would be horribly inefficient.  Thankfully it’s not.  The purpose of this account is to build up slowly and then excrete itself all at once to pay for ‘large’ one off holiday expenses.  This dirty habit stops me from using credit (overdraft or credit cards) to pay for holidays, or dipping into my ISA.

There’s a couple of ways to look at Spendy-Hands August.  On the one hand it was the worst savings rate so far in 2017 by a long way, causing quite a substantial drop in the average for the year to date.

On the other, more optimistic, hand despite feeling like we spend way too much I still managed to save just over a quarter of my wage.  Admittedly that is mostly just my pension savings, so I have chewed through all of my disposable income this month.

I kept coming back to this whilst looking at my numbers for the month.  I’ve nearly spent all of my income for the month, and basically only saved into my pension.  And it didn’t feel good.  Yet this is how plenty of people live, spending everything thing they earn each month, saving nothing or just the bare minimum.

The higher than average spending in August has brought my average savings rate for the year down to 66.5%.  This is still comfortably above my target of 60% for the year so I won’t grumble or dwell on it much more.

NetWorth – 45% annual growth target

Disclaimer – I don’t include the equity in my house in this calculation.

NetWorth-wise things were ticking over nicely at the end of July, I had seen a trend of steady growth since the start of the year.  The growth a combination of rising investments and a consistently high savings rate.

August saw a dip in savings rate, down to the lowest for the year.  But just what has this done to my NetWorth?  Has it hampered my thundering NetWorth engine?

August 2017

There’s some growth there for August, I promise.  It’s just smaller than the previous month.  See;

There’s the growth. All it takes is a bit lot of zoom

In fact, my NetWorth saw an average growth of 3.6% a month prior to July.  And then it experienced only a 0.9% increase for August.  A coincidence that it was a month with a poor savings rate?  I think not.  It’s a game of consistency!

My target for 2017 is a NetWorth growth of 45%, which at the moment I’m looking like just missing out on.

We have a couple of weeks holiday in September, a large chunk of which was paid for in August.  Flights and accommodation have been covered already, so I’m hoping for my savings rate to start creeping up again in September.  We’ve booked everything through Airbnb (affiliate link, burn in hell Mr Z!), choosing to base ourselves in a few cities and not move around too much.  It’s the first time we’ve travelled extensively through Airbnb so it will be interesting to see how it goes.

Prior updates can be found right here.

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Mr Z

7 thoughts on “Savings Diary: August 2017 Update – Volatile

  1. FIREin' London

    Hi Mr. Z,

    Look at it this way – you are still saving 25% of your salary even paying for a holiday! When there was an article on the BBC as to how the average saving rate has fallen to I think it was 2 or 3% that really isn’t bad going – just don’t do it next month 😉

    Glad to see I am not alone with a cash flow fund that means the investments always keep ticking up and helps to spread the cost!

    I will look forward to hearing about the holiday and how the AirBnB and keeping it relatively frugal went!


  2. Wephway

    I suppose you could amortize big one-off payments like your holiday. For example – to use a terrible football analogy – when Arsenal FC bought Mezut Ozil for around £40m, they bought him for a contract of 5 years, so his value amortized was £8m per year. Financially speaking anyway. You could do the same with holidays, if say you go on two big holidays a year then you could spread that cost over 6 months and it would give you a more accurate monthly savings figure.

    That’s probably overthinking things though. I had the opposite problem this month – I didn’t have any major yearly or social expenses so my savings rate looked great, but it was a one-off really. Earlier this year I spent about £5k renovating my new house so my savings rate for the year doesn’t look nearly as great. Maybe I should amortize that £5k over several years?


  3. SurreyBoy

    Mr Z, your angst does you credit but remember that you have to live and be nourished by memorable experiences as well as saving up for FI. I got nailed for big expense on this year’s family holiday but the memories will be there forever. Slow and steady Mr Z, keep on the mission but enjoy life as you go.

  4. Prometheus

    We need more details on this holiday, was it a foreign extravaganza involving racing yachts or a paddle in the mud off Weston super mare?

    Have to say my last foreign holiday was a week in Southern California. Cost me £400 – careful use of air miles and hotel loyalty cards etc. [from my job…..]. Other than that my previous holiday abroad was with my parents 😉

    Could it be some further savings could be had by a domestic vacation?

  5. weenie

    Hey Mr Z

    Definitely a one off and given your ultra-high savings rate, I think you can allow yourself this without beating yourself up too much. It’s barely made a difference to your overall savings rate, which is still awesome!

    I too have a ‘holiday fund’, a low interest savings account which I put a small amount into each month. It’s never enough to pay off my annual holiday(s) in full but helps balance my spending. It does mean I’m adding towards this holiday fund instead of maximising my savings towards FI but I’m not in a race to FI, I still want to and need to enjoy my life right now, which means I gotta pay for it.

    Hope you have a great holiday.

  6. Organised Redhead

    Hey Mr. Z,

    I agree with the other comments, a Zombie’s gotta have a holiday and some fun along the journey to FIRE! You’re still smashing your savings goal for the year, so I think you can have your holiday guilt free.


  7. Tom

    Hi Mr. Z.

    Ran into your blog about a week or two ago, and just started reading it cover to cover. Just finished.
    You’ve been through quite a journey! It’s amazing to see your thought process evolving over time, and that change in the atmosphere of your posts from 2014 to today.
    Going through the same journey myself the past few years (with a few more to come), your writing resonated with me a lot. Thanks for sharing!



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